Pegatron Reportedly Tapped By Apple As Primary Maker Of Low-Cost iPhone

Earlier this month, Reuters reported that Apple supplier Pegatron would be increasing its China-based workforce by 40 percent in the second half of the year, suggesting that the long-rumored low-cost iPhone would soon enter mass production. Today, The Wall Street Journal has practically echoed this statement with a new report. According to the report:

Pegatron, which has about 100,000 employees in Taiwan and China, expects to increase its China workforce in the second half of the year by around 40%, Chief Financial Officer Charles Lin said. Analysts attribute the staffing increase largely to expected production of low-cost iPhones.

The Wall Street Journal notes that Pegatron, which tied up with Apple for the production of iPhones in 2011 and iPad minis last year, will be the "primary assembler" of the so-called budget iPhone. Why Pegatron and not Foxconn, Apple's largest manufacturing partner? The publication adds:

People familiar with the matter point to strategic reasons for the shift: risk diversification after Foxconn's manufacturing glitches last year with the iPhone 5 that resulted in scratches on the metal casings, and Apple's decision to expand its product lines amid growing competition from Samsung Electronics Co. and others.

Another reason cited by analysts is that Pengatron has been willing to forgo a significant portion of its profits in exchange for having Apple's business. According to KGI Securities analyst Angela Hsiang, Cupertino will account for more than half of Pegatron's revenue from its consumer electronics and communications businesses, including Apple's much-anticipated budget smartphone. The less expensive iPhone model is expected to feature a polycabornate body and to capture up to 11 percent of the low-cost handset market by next year. It's rumored to be launched as early as this fall. During his interview at the D11 conference yesterday, Apple CEO Tim Cook suggested that the fact that a second iPhone model hasn't been released so far "doesn’t shut off the future.”

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